Direct Labor and Direct Materials Variances, Journal Entries Samson Company produces paper towels. The company has established the following direct materials and direct labor standards for one case of paper towels: Paper pulp (4 lbs. @ $0.30) $ 1.20 Labor (1.8 hrs. @ $18) 32.40 Total prime cost $33.60 During the first quarter of the year, Samson produced 40,000 cases of paper towels. The company purchased and used 160,700 pounds of paper pulp at $0.27 per pound. Actual direct labor used was 73,000 hours at $18.10 per hour. Required: Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box. 1. Calculate the direct materials price and usage variances. Materials Price Variance Materials Usage Variance 2. Calculate the direct labor rate and efficiency variances. Favorable Unfavorable Labor Rate Variance Labor Efficiency Variance Unfavorable Unfavorable ✓
Direct Labor and Direct Materials Variances, Journal Entries Samson Company produces paper towels. The company has established the following direct materials and direct labor standards for one case of paper towels: Paper pulp (4 lbs. @ $0.30) $ 1.20 Labor (1.8 hrs. @ $18) 32.40 Total prime cost $33.60 During the first quarter of the year, Samson produced 40,000 cases of paper towels. The company purchased and used 160,700 pounds of paper pulp at $0.27 per pound. Actual direct labor used was 73,000 hours at $18.10 per hour. Required: Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box. 1. Calculate the direct materials price and usage variances. Materials Price Variance Materials Usage Variance 2. Calculate the direct labor rate and efficiency variances. Favorable Unfavorable Labor Rate Variance Labor Efficiency Variance Unfavorable Unfavorable ✓
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Direct Labor and Direct Materials Variances, Journal Entries
Samson Company produces paper towels. The company has established the following direct materials and direct labor standards for one case of paper towels:
Paper pulp (4 lbs. @ $0.30)
Labor (1.8 hrs. @ $18)
Total prime cost
During the first quarter of the year, Samson produced 40,000 cases of paper towels. The company purchased and used 160,700 pounds of paper pulp at $0.27 per pound. Actual
direct labor used was 73,000 hours at $18.10 per hour.
Required:
Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box.
$ 1.20
32.40
$33.60
1. Calculate the direct materials price and usage variances.
Materials Price Variance
$
Favorable
Materials Usage Variance
2. Calculate the direct labor rate and efficiency variances.
Labor Rate Variance
Labor Efficiency Variance
Unfavorable
Unfavorable
Unfavorable
✓
✓
✓
✓
Transcribed Image Text:3. Prepare the journal entries for (1) the direct materials price variance, (2) the direct materials usage variance, and (3) the direct labor variances. If an amount box does not
require an entry, leave it blank.
1.
2.
3.
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